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© 2016 KPMG Advisory (Myanmar) Limited, a Myanmar limited liability company and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.
The KPMG name and logo are registered trademarks or trademarks of KPMG International.
Document Classification: KPMG Confidential
Myanmar Business Update and Outlook
KPMG Executive Briefing and Networking
31 May 2016
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© 2016 KPMG Advisory (Myanmar) Limited, a Myanmar limited liability company and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.
The KPMG name and logo are registered trademarks or trademarks of KPMG International.
Document Classification: KPMG Confidential
DisclaimerThis brief presentation on Myanmar tax managed by Internal Revenue Department andother regulatory issues is intended to provide an introduction to some of the key pointsand information to participants of the Seminar.
The information is intended for general information purposes only and should not beused for decision making purposes. The applicability of the information to specificsituations should be determined through consultation with professional advisors,including any updates to Myanmar tax legislation which is a regular event.
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© 2016 KPMG Advisory (Myanmar) Limited, a Myanmar limited liability company and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.
The KPMG name and logo are registered trademarks or trademarks of KPMG International.
Document Classification: KPMG Confidential
Agenda• Business Environment
• Regulatory Environment
• Outlook and opportunities
• Question & Answer Session
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© 2016 KPMG Advisory (Myanmar) Limited, a Myanmar limited liability company and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.
The KPMG name and logo are registered trademarks or trademarks of KPMG International.
Document Classification: KPMG Confidential
■ Mobile penetration rate: 50% (2014-15 est.)
■ Electricity consumption: 6.1 billion kWh (2010
est.)
■ 18,769 cubic meter per capita of renewable
fresh water per year
Myanmar Fast FactsECONOMY
PEOPLE
RESOURCES
TRADE
SOCIAL INDICATORS
OPPORTUNITIES
■ Gross domestic product (GDP): US$64.3 billion
■ GDP growth rate: 8.5% (2015)
■ Labor force: 34.3 million
■ Exports: US$13.3 billion (20.6% of GDP)
■ Imports: US$14.7 billion (22.9% of GDP)
■ Generalized Scheme of Preference (GSP) provided
by EU and Japan. It is also being considered by US
■ Total population: 51.4 million (preliminary
estimate)
■ Total number of households: 10.9 million
■ Total urban population: 14.9 million
■ 10 trillion cubic feet of proven natural gas
reserves
■ 47.7 million barrels of oil reserves
■ Total length of costal line : 2,278 km
■ Part of ASEAN with a combined market size of
625 million
■ Strategically located between China, India, S.E.
Asia, and near Indian Ocean shipping lanes
■ Potential to achieve US$200 billion+ GDP in
2030
■ $650 billion total investment needed by 2030 to
support growth potential, $320 billion in
infrastructure alone
■ 10 million people to move to large cities by 2030
■ Hugely under-banked & underinsured
population (<20% with access to formal financial
services)
Mandalay
Myanmar
China
India
Thailand
Laos
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© 2016 KPMG Advisory (Myanmar) Limited, a Myanmar limited liability company and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.
The KPMG name and logo are registered trademarks or trademarks of KPMG International.
Document Classification: KPMG Confidential
Challenges in Doing Business
0% 5% 10% 15% 20%
Poor public health
Crime and theft
Insufficient capacity to innovate
Tax rates
Restrictive labor regulations
Poor work ethic in national labor force
Government instability/coups
Inflation
Tax regulations
Foreign currency regulations
Inadequate supply of infrastructure
Policy instability
Inadequately educated workforce
Inefficient government bureaucracy
Corruption
Access to financing
Myanmar issues identified by percentage of respondents
Note: (1) World Economic Forum “The Global Competitiveness Report 2014–2015” (2) Transparency International Corruption Perception Index 2012 (3) EIU Political Instability Index
Source: World Economic Forum; Transparency International Corruption Perception Index; EIU
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345
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© 2016 KPMG Advisory (Myanmar) Limited, a Myanmar limited liability company and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.
The KPMG name and logo are registered trademarks or trademarks of KPMG International.
Document Classification: KPMG Confidential
329.58
19998.965
4644.461419.467
4107.055
8010.5339481.275
0
5000
10000
15000
20000
25000■ F&B, Consumer goods
■ Oil & Gas
■ Telecommunications
M&A and Investment ActivityFDI Inflow to Myanmar (USD million) Notable deals & multinational entries
Note: Based on Myanmar fiscal year of 1 April to 31 March; FY15 data is 10 months to 31 January 2015
Source: FDI figures are approved foreign investment figures reported by Myanmar’s Directorate of Investment and Company Administration (DICA)
Breakdown of FDI by Sector FY15
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© 2016 KPMG Advisory (Myanmar) Limited, a Myanmar limited liability company and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.
The KPMG name and logo are registered trademarks or trademarks of KPMG International.
Document Classification: KPMG Confidential
Common Deal IssuesOrigination and identification of opportunities
■ Availability of data to build an investment case
■ Valuation – expectation gap
■ Infrastructure
The importance of taking a long-term view
Execution obstacles and common due diligence issues
■ Ability to complete due diligence
■ Complex deal perimeters and carve-outs
■ Ownership of key assets, licenses
■ Legal concerns – contracts, legal framework, arbitration
Asset deals often preferable to share deals
Integration and operation
■ JV operating framework – decision-making and strategy
■ FCPA and regulatory compliance
■ Accounting and management reporting
■ Human resources
Pick the right local partner, for the right reasons
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© 2016 KPMG Advisory (Myanmar) Limited, a Myanmar limited liability company and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.
The KPMG name and logo are registered trademarks or trademarks of KPMG International.
Document Classification: KPMG Confidential
Business EnvironmentCommon misconceptions: • Everything is negotiable
• Unclear boundaries so actually many things can be achieved through lobby efforts
• Cost structure is low
• It is more important to obtain state level approvals rather than national approvals for
project to proceed
Fact: • Strong desire to follow strict interpretation of legislation.
• Discussions on grey areas expected to be done up front
• Cost is high due to efficiency limitations
• Decision making is still very centrally controlled. Upward delegation is commonplace.
• Capacity building and a focus on business enablers
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© 2016 KPMG Advisory (Myanmar) Limited, a Myanmar limited liability company and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.
The KPMG name and logo are registered trademarks or trademarks of KPMG International.
Document Classification: KPMG Confidential
Regulatory Environment
MyanmarCompanies Act
Special EconomicZone Law
Myanmar ForeignInvestment Law
• Strong influence from the UK on prior legislation
• Reform / Deregulation is impacting investment framework
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© 2016 KPMG Advisory (Myanmar) Limited, a Myanmar limited liability company and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.
The KPMG name and logo are registered trademarks or trademarks of KPMG International.
Document Classification: KPMG Confidential
Regulatory Environment• Activities that are restricted / require
joint venture
• Manufacturing of food and drink
related products
• Pharmaceutical and chemical
products and arms
• Paper and plastic products
• Real estate related development
• Transportation related
• Hospitals, clinics and diagnostic services
• Railway, water borne transportation and
air transportation
• Oil and Gas and Mining
Issuance of import licenses
• Wholesale and retail businesses
Activities that do not require joint ventures
• Manufacturing of other products
• Manufacturing of non-restricted products in
the SEZ
• Other business activities in the SEZ
• Other Services
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© 2016 KPMG Advisory (Myanmar) Limited, a Myanmar limited liability company and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.
The KPMG name and logo are registered trademarks or trademarks of KPMG International.
Document Classification: KPMG Confidential
Financial Statements• Financial Statements will be based on Myanmar
Financial Reporting Standards (close to IFRS).
• Fixed fiscal year end of 31 March
• Financial Statements can be presented in
functional currency of foreign investors.
• Financial Statements can be in English or
Myanmar.
• Annual audit required.
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© 2016 KPMG Advisory (Myanmar) Limited, a Myanmar limited liability company and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.
The KPMG name and logo are registered trademarks or trademarks of KPMG International.
Document Classification: KPMG Confidential
IRD reforms
Before reform
Company Circle Tax Office (“CCTO”)
Large Taxpayers’ Office (“LTO”)
Medium Taxpayers’ Office 1 (“MTO 1”)
Medium Taxpayers’ Office 2 (“MTO 2”)
After reform
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© 2016 KPMG Advisory (Myanmar) Limited, a Myanmar limited liability company and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.
The KPMG name and logo are registered trademarks or trademarks of KPMG International.
Document Classification: KPMG Confidential
Brief introduction to tax
Tax Residency based on
registration:
Myanmar incorporated companies are tax
resident in Myanmar.
Corporate Income Tax Rates:Resident companies, branches without MFIL
incentives – 25%
Capital Gains Tax rates:
Resident/non-resident tax payers – 10%
Oil and gas industry – 40 to 50%
Withholding Tax on transactions
with Non-Residents:
Dividends – 0%
Interest – 15%
Royalties – 20%
Services – 3.5%
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© 2016 KPMG Advisory (Myanmar) Limited, a Myanmar limited liability company and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.
The KPMG name and logo are registered trademarks or trademarks of KPMG International.
Document Classification: KPMG Confidential
Commercial TaxExempt Goods & Services
• 86 types of goods
• 29 types of services
Commercial Tax on specific goods
• 5% commercial tax due on the sales proceeds inclusive of specified goods tax if manufacture locally;
• 5% commercial tax on the landed costs inclusive of specified goods tax if imported.
Concession
• 3% on Inbound air transport service
• 3% on sales proceeds of the building built and sold in the country
Export• Export of Goods except crude oil & electricity - 0%
• Crude oil - 5%
• Electricity - 8%
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© 2016 KPMG Advisory (Myanmar) Limited, a Myanmar limited liability company and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.
The KPMG name and logo are registered trademarks or trademarks of KPMG International.
Document Classification: KPMG Confidential
Outlook• With relatively smooth political transition, foreign investments are expected to increase with
an increase in investments from the US a contributing factor
• New office holders installed in new fiscal year and are expected to take some time to “learn
the ropes”
• Policies that have been set by previous governments are unlikely to be reversedimmediately
• Expected increase in pace of infrastructure projects to meet demand
• Increase in enforcement action to raise revenue for infrastructure projects. Tax policyreform will continue at current pace with annual changes announced.
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© 2016 KPMG Advisory (Myanmar) Limited, a Myanmar limited liability company and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.
The KPMG name and logo are registered trademarks or trademarks of KPMG International.
Document Classification: KPMG Confidential
Opportunities• Currently, goods imported through agent. This is starting to change with the authorities
allowing more joint ventures to import certain goods. E.g. vehicles, medical equipment,
certain agriculture related products. More are likely upcoming deregulations
• Exports still dominated by O&G, gems and agriculture related products. But authorities are
trying to encourage more manufacturing / production in Myanmar to create jobs growth.
• Agricultural revolution still in the making, lack of financing, small sized farms, lack of
application of technology. When this takes place, income levels expected to rise faster
• Recognition of international brands previously already being imported into country makes
building brand easier
• Health care / Education / Agriculture has been clarified to be key sectors of focus for new
government
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© 2016 KPMG Advisory (Myanmar) Limited, a Myanmar limited liability company and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.
The KPMG name and logo are registered trademarks or trademarks of KPMG International.
Document Classification: KPMG Confidential
Thank you
The information contained herein is of a general nature and is not intended to address thecircumstances of any particular individual or entity. Although we endeavor to provide accurateand timely information, there can be no guarantee that such information is accurate as of thedate it is received or that it will continue to be accurate in the future. No one should act on suchinformation without appropriate professional advice after a thorough examination of theparticular situation.
© 2016 KPMG Advisory (Myanmar) Limited, a Myanmar limited liability company and amember firm of the KPMG network of independent member firms affiliated with KPMGInternational Cooperative (“KPMG International”), a Swiss entity. All rights reserved.
The KPMG name and logo are registered trademarks or trademarks of KPMG International.
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